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Commodities Jump to Five-Month High as QE3 Boosts Metals

Commodities surged to a five-month high after the Federal Reserve announced a third round of fiscal measures to bolster the U.S. economy, fueling expectations that raw-material use will increase.

The Standard & Poor’s GSCI Spot Index of 24 raw materials rose 0.6 percent to settle at 687.22 at 3:59 p.m. New York time. Earlier, the gauge reached 689.22, the highest since April 5. The measure climbed for the sixth straight session, the longest rally since July 19. Silver and gold gained the most in 10 weeks, leading the rally.

The Fed plans to expand holdings of long-term securities with open-ended purchases of $40 billion of mortgage debt a month. The benchmark interest rate probably will be held near zero “at least through mid-2015,” the Federal Open Market Committee said today. The GSCI index surged 92 percent from December 2008 through June 2011 as the Fed bought $2.3 trillion of debt in two rounds of so-called quantitative easing.

“That’s a commodity owner’s dream come true in terms of open-ended quantitative easing,” Walter “Bucky” Hellwig, who helps manage $17 billion at BB&T Wealth Management in Birmingham, Alabama, said in a telephone interview.

This year, the GSCI index has gained 6.6 percent. The MSCI All-Country World Index (MXWD) of equities has climbed 12 percent and. Treasuries returned 1.7 percent, a Bank of America Corp. index showed.

Gold Rally

Gold futures for December delivery jumped 2.2 percent to settle at $1,772.10 on the Comex in New York, the biggest gain since June 29, as investors bought the metal as a hedge against inflation. Earlier, the price reached $1,775, the highest for a most-active contract since Feb. 29.

“Gold, in a way, is a pure currency, and that makes it the most interesting and the most favored when we see this type of situation” with quantitative easing, Sterling Smith, a futures specialist at Citigroup Global Markets in Chicago, said in a telephone interview.

Silver futures for December delivery jumped 4.5 percent to $34.778 an ounce on the Comex, the biggest gain since June 29. Earlier, the price reached $34.87, the highest since March 5.

The London Metal Exchange index, which includes aluminum, copper, lead, nickel, zinc and tin, rose for the fifth straight session, the longest rally in eight months.

Oil Advances

Crude oil advanced to a four-month high after the Fed move. The commodity also got a boost from concern that protests in the Middle East and North Africa may lead to supply disruptions.

“In the long run, this should be bullish because what they are promising is the gradual increase in stimulus,” said Jason Schenker, the president of Prestige Economics LLC, an Austin, Texas-based energy consultant. “The $40 billion of mortgage debt each month will increase liquidity.”

Oil futures for October delivery advanced 1.3 percent to $98.31 a barrel on the New York Mercantile Exchange, the highest settlement since May 4.

Protesters tried to storm the U.S. Embassy in Sana’a, Yemen. A Sept. 11 attack on the U.S. Consulate in Benghazi, Libya, killed the American ambassador, Chris Stevens, and three colleagues.

To contact the reporter on this story: Elizabeth Campbell in Chicago at ecampbell14@bloomberg.net

To contact the editor responsible for this story: Steve Stroth at sstroth@bloomberg.net

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